Post three of your “margin notes” from your reading of the chapter to your blog. Why did you make the comment you made in the margin? What did you find confusing, useful, or important about the passage you commented on?
1. I had a real gut-level response to the fact that white athletes make substantially more than black. It takes me back to decades ago in Boston where I witnessed a noticeable attempt in baseball, football and basketball to stockpile these sports with white players. The predominantly large white New England crowd definitely preferred to view whites on their playing fields. Attendance at venues was greater along with a larger television audience. It was not a startling discovery to see this pay discrimination in the Micro text but the specifics such as fewer fans attending baseball games that black men were the starting pitchers and also the decrease in black baseball card sales really brought a revelation to how little progress has been made in this area of sports and probably in many other business region.
2. The benefits of beauty can’t be ignored either. Beauty pays. It pays in advertising, acting, bartending, and waiting on tables. How right that is as I reminisced my younger days where I specifically targeted restaurants or bars where the waitresses were especially pretty and sexy. Firms are willing to pay more to attractive workers mirrors its company penchants. I remember actually being jealous last year when my date requested we go to a Ryan Gosling movie rather than my choice. In question #1, I addressed an obvious discrimination. This beauty boon is not quite as palpable but when I examine how important the advertising agencies deem the splendor cheekbones and physiques of all these clothes models, men and women.
3. The compensating differential term also stood out. I took on a hazardous job involving the moving and handling of wild animals for a company that paid much better wages to us rather than workers who were not tangibly involved in the relocation of these beasts. I’ve always been attracted to difficult, dangerous, or otherwise undesirable jobs because of the thrill and thriving wages. I had never heard the term “compensating differential”. I always referred to it as “hazard pay”, “combat pay”, or “high-risk pay”. It’s interesting that there is an actual economic term for the wacky work I used to do for the overall increase in money.
Pretend for a moment you are the instructor developing this course. Write 3 short answer questions for an exam over this chapter that you believe cover the most important points in the chapter. Post all three questions on your blog. Give an example of a great answer and an okay answer to each question. (Be sure to differentiate between the two responses.)
1. What are the three most important factors of production?
Land- people always have mixed land and labor but the earth origin goods like air, water, soil and minerals that are used in the making of products are considered land factors. Good example= fields of Nebraska where the farmer grows corn.
Labor- effort put in by people, which can also include tech and marketing work as well as the physical hard labor of men and women.
Good example= the hard working farmer who works fourteen hours a day during harvest time.
Capital- includes all resources or tools people might use to improve productivity. Some forms of economic capital are buildings, tools, and machinery.
Good example= Grain silo on the farmer’s property that stores the corn before it goes to market.
Entrepreneurship- the free enterprising person is important in identifying a business opportunity and organizes the success or failure of a business venture and assumes the vanguard of the whole operation. Without him, business would be impossible.
Knowledge- a farmer’s knowledge may expand as well as productivity methods discovered in farming that can eliminate much of the labor involved almost eliminating the farmer’s labor value altogether.
Energy- can be seen as an individual factor of production, with an elasticity smaller than labor
2. What’s the definition of capital and how does it differ from land?
Good Answer- Capital is something owned by a business or company that provides an ongoing service. Physical structures along with any equipment are often lumped together to represent capital. It’s one of the factors in production.
Bad Answer- Capital is anything used in the production of goods including land. It’s land and also includes naturally resources such as geographical resources. Another bad answer would include it as a building in Washington D.C.
3. How would some economic production factors affected if the United States was nuclear bombed and many major cities were wiped out with a drastic decrease in total population?
Good Answer- Well, regardless of the horrific consequences to the American people and industries, a reduced number of work force, the marginal product of labor rises. Consequently, wages would rise also. If the agricultural were largely intact and the land was pretty much unaffected by the calamity, an additional unit of land would produce less additional output. The marginal product of land would fall. This may result in lower rents and increased prosperity and abundance for lower class workers.
Bad Answer- This would be an opportunity where a decrease in population would provide more labor, an input in production. It also would provide more human capital, or skills. Finally, because of the increase of the latter two, this would cause increasing levels of technology because innovation increases. On the demand side, lower populations generally consume more resources than larger ones.
Advertising is commonly used by firms operating under monopolistic competition as a way to create product disparity. This can result in some degree of market control and a higher price. Advertising is information provided by a firm about its product. This can come through media such as television, radio, newspapers, magazines, and the Internet, to stimulate sales, revenue, and profit.
The art of advertising is frequently used by monopolistic companies to accomplish a goal of pointing out product differences. To the extent that a firm can inform buyers about physical differences or create the perception of such differences, then product differentiation increases, sometimes rocketing an increase in sales. On the other hand, advertising makes the public consumer becomes more fully aware of the products available in the market. Firms then have less market power and the market is more competitive.
I thought it was interesting that firms that sell homogeneous products like peanuts and crude oil spend nothing to advertise; yet highly differentiated products have the firms spending enormous amounts of money to promote their merchandises.
The recent Super Bowl advertising cost three million dollars per minute! Budweiser, Dove(for men) and Doritos went for it. Talk about competitive markets! Beer, beauty, and chips. What a world. I don’t drink anymore, but I do admit to trying the Dove soap and buying a bag of cool ranch Doritos after the game. I like the soap and continue to purchase it and I’ve always loved the chips.
1.How did your understanding of monopolies change after reading this chapter? What do you see differently now?
2. Give an example of a regulated monopoly (a monopoly that exists due to government fiat). Why did we choose to give this particular firm monopoly status? Do you think it was a good decision? Why or why not?
1. I always thought of a monopoly as a company that supply a product unlike anything on the market and nobody else had the resources able to reproduce that particular product. I thought some patents could prevent replication and henceforth the manufacturing holders of that patent had a “monopoly” on the product. I didn’t consider a natural monopoly where a single firm can produce an item at a lower cost than others and
corner the market on that item.
2. The government chooses on the basis of the economic well-being of the country. I painted the estate of the 1960’s to 70’s president of IBM. I remember him always on the phone bickering about government regulations and heard him many a time say the “damn government should mind their own f’in business.” Little did I know that because IBM controlled over 70 percent of the computer market back then they were considered to be a monopoly. The government saw them as having excessive powers. The government wanted to break it up into smaller competitive companies. Then Microsoft rolled in with and is considered a monopoly because of their introduction of Windows to the computer market. Drug companies sometimes have a regulated monopoly in the drug they sell. I remember loosig my hair in my early thirties and Rogaine had just been entered into the market. It was the only solution to male baldness at the time but it definitely was a price maker not a price taker. A month prescription would cost about $80! I thought it was a ripoff. Britol-Meyers was allowed to be monopolists in the drug. I guess it encouraged research but it hurt consumers like me in the wallet. I don’t think it was a good decision.
1 Why do marginal costs first fall and then begin to rise?
2 Why are marginal costs important to a firm when making decisions to increase or decrease production?
3 How can you apply these cost concepts to your own life?
1. In some companies that desire to increase the quantity of their product, the hiring of an additional worker may not have much effect on the marginal product or increase of output. If the company decides to put on more employees to increase even more production, these workers may have a substantial contribution to the output. They can more easily work as a team and allocate various tasks to optimize marginal product. Picture two guys trying to build kit cars. Then picture a group of three. The added third guy may increase output minimally. But with a with addition of another fella they might have worked out some type of assembly line technique and the quantity of output. This company experiences increasing marginal product before diminishing marginal product. The marginal cost will fall for a short time before it starts to rise.
2. Marginal cost seems to reflect whether or not it’s to a firm’s advantage to increase production because the added increase in total cost from the extra production is profitable to the company. It’s a worthwhile investment. The company may decide that the increased cost of extra production isn’t worth it. The workers might be getting in each other’s way. They may have to wait for other tasks to be completed before they can accomplish what they are to do. The working place can get crowded and confusing and production is not beneficial. My sister had a restaurant that was modest in size. When she expanded her number of tables and cooks. The quantity of food the restaurant produced was already high, the marginal product of the extra cook was low, and the marginal cost of the increase was high. She downsized after six months.
3. I’m going to form a small painting company when I return to Aspen in June. I’d like to have one guy help me, ideally three to four. But I remember the hassles of yesteryear when I’d take on too much and an added guy would just backfire cost-wise. They’d be hanging around before materials got dropped off, have to wait for one to spray the main body of a home before the trim work, the ladders would get on top of each other, etc. The Roaring Fork outside painting season is short. So I’ll have to make some astute evaluations regarding the addition of a worker (or two) and just how much the added employee affects the marginal cost. I can pretty much calculate what could be optimal for the company
For a guy like me who lately hasn’t made a lot of money and puts all my receipts into a shoebox letting an accountant sort out the mess, the thought of any tax brings some anxiety. In reviewing the various taxes discussed in chapter 12 it appears the progressive tax for which higher income people pay a greater fraction of their income rather than low-income folks seems the best idea. It almost reminds me of the Robin Hood story of stealing from the rich to give to the poor, but in this case it’s just taxing higher for the blessed and less for less fortunate. It’s a grand concept to me. The flat rate would hurt the poor more. Consumption tax goes in one ear and out the other because I’ve really been delinquent in saving accounts.
I believe Colorado’s flat rate tax places an undue burden on low-income taxpayers. The existing system limits deductions and credits and seems to offer fewer opportunities to encourage specific investing or saving activities through tax breaks. As I said, I would definitely favor a progressive tax system here, especially after living in Aspen and seeing many wealthy people take tremendous tax breaks and end up paying the government little in comparison to their high annual income. I wasn’t a registered voter last year but I’ll definitely be looking for that choice this year. With the legalization of marijuana the state seems to be doing very well and perhaps can cut us taxpayers a break in some areas.
I choose to discuss the public good of Aspen’s Christmas town decorations. It meets the criteria of a Public Good. The town’s holiday lights, tree ornaments, and overall decorative displays are clearly neither excludable nor rival in consumption. Once a year the town of Aspen provides a festive Christmas display throughout various areas of the town. Although there are plenty of free-ride tourists who benefit from the beauty of the displays, this is ultimately an example where the government most likely decided that the total benefits of this Public Good exceeds the cost. Consequently, it provides the public good and pays for it with town tax revenue. The residents benefit, shopkeepers benefit, and the overall cost is probably a few bucks per resident per year. Everybody wins. Aspen could farm out the decorations, labor and liabilities to a private market. But this kind of endeavor would not be profitable because a town can always use their own resources that are already available to quickly accomplish the task. I don’t believe a private can be hired to do the same job for less. The Christmas display and decorations are still socially desirable yet inefficient to a private market.
I never thought of National Defense as a Public Good. Goods imply something to buy for me so neither lighthouses nor the creation of fundamental knowledge would have ever entered my mind when mentioning Public Goods.